Reconciling physical assets to ledger entries, also known as matching, can take on a variety of forms. In fact, the reason to reorganize and categorize asset registers as an initial first step is to aid later on when attempting to compare and match records to assets.

It is important to note that reconciling using assumptions is not ideal. Therefore, one objective throughout this process is to identify past recording problems and bring those to the attention of the client.

In addition to highlighting problems, sets of recommendations are included, which are designed to avoid repeating problems going forward.

For example, bundling multiple assets into a single register entry can cause various problems:

First, there is no reliable way to reconcile individual items. If one asset that is represented in the bundle is upgraded (increasing its value and/or extending its useful life) or retired, making the associated register adjustments is difficult. More often than not we have found is that a new entry is made to the register that represents the adjustment making reconcile that much more complex.

Bundling of multiple expensed items into a single entry is another common problem we encounter. Individually, these items do not meet the capital threshold and should therefore be expensed. However, when combined, multiple items exceed the capital limit and are therefore depreciated.

Given that these types of assets are normally considered “expensed”, it is likely that they were excluded from the physical inventory count.

The reconciliation effort should produce a get well plan with recommendations aimed at reducing the effort required to reconcile as well as to align with compliance reporting.